Covered Bonds

Wüstenrot Bausparkasse issued a €250m eight year Pfandbrief and, though it was smaller and attracted less demand than its debut deal, the new issue premium was tight.

The European covered bond industry this week rejected most of the recommendations for the covered bond directive made by the European Parliament Committee on Economic and Monetary Affairs’ rapporteur, Bernd Lucke. However, there is agreement on one important point.

Lloyds Bank found strong demand for the first Sonia-linked sterling transaction from a financial institution. Meanwhile the euro covered bond market ground to a standstill with just Wüstenrot Bausparkasse mandating leads for a sub-benchmark deal.

GlobalCapital announced the winners of its Sustainable and Responsible Capital Markets Awards 2018 in Amsterdam on Tuesday evening. This year’s two sovereign debut green finance issues, from Indonesia and Belgium, won Deals of the Year in their regions, and there were double laurels for Danone, in both the bond and loan markets.

Deutsche Bank was easily able to issue a €1bn five year Cédulas on Tuesday, alongside NIBC Bank which sold a €500m 10 year CPT deal, with both offering generous new issue concessions. On the same day, Aareal Bank and Commerzbank issued tightly priced Pfandbriefe.

Lloyds Bank is set to bring the first ever FIG benchmark linked to Sonia on Tuesday, alongside three issuers bringing euro benchmarks and one selling a tap.

Covered bond deals sold on Monday by Compagnie de Financement Foncier (CFF), United Overseas Bank (UOB) Singapore and Deutsche Hypo were all well received and suggested that the European Central Bank’s (ECB) planned end of the covered bond purchase programme is not a cause for concern.

Deutsche Hypo has mandated joint leads for a green Pfandbrief to be issued off its mortgage Pfandbrief programme.

The covered bond market has a reputation for allowing tough trades to be done, so when My Money Bank postponed its debut deal, the product was imprudently tarnished. The situation could have been avoided had the deal been launched a week earlier or sometime later — just not last week.

In response to the European Commission’s draft covered bond directive, the European Central Bank has set out a number of recommendations that should boost the appeal of covered bonds for investors, though not necessarily with issuers.

Royal Bank of Canada boosted sentiment in the covered bond market on Thursday with a tightly priced €1.5bn seven year. At the same time Société Générale issued a defensively priced and well subscribed €750m five year.

After a plethora of small deals, the covered bond market look set for a proper test of appetite as Royal Bank of Canada prepares to issue a seven year euro denominated covered bond.